2018 Global Outlook: Regulation, Deregulation & New Technology

The International Energy Agency (IEA) reports that there is now more than 303 gigawatts (GW) of solar PV installed globally. Wind installations have similarly surged, reaching a total installed global capacity of 487 GW by the end of 2016, with 54 GW installed in 2016 alone.

Corporate purchases are in large part responsible for this record-breaking growth, as commercial, industrial, and institutional (C&I) buyers seek to fulfill commitments made under accords such as the Paris Agreement and other targets. Despite increasing market complexity and regulatory uncertainty, the C&I global energy buying market is expected to continue to expand in 2018.

Renewable Energy Market Regulation & Deregulation

2017 brought us the continued liberalization of the Mexican market, allowing for the disaggregation of ownership of the market from the state-owned utility and opened it up to new C&I entrants. In Australia, a confluence of factors served to increase energy prices to what has been deemed crisis levels. As a response, there has been a sharp uptick in appetite for corporate PPAs. 2017 also saw the issuance of the first EACs by the Chinese government. EACs are typically the instrument that sets the foundation for future market disaggregation and development.

Beneficial regulations such as tax credits or feed-in tariffs typically support market development, but these policies can easily be reduced or reversed. European markets, many of which are moving from feed-in tariffs to auctions, or the U.S., which faces significant economic headwinds under the conservative Trump administration, may experience uneven growth in 2018 as a result. Regulation can impact onsite generation, offsite generation, and the creation and procurement of EACs — further complicating C&I buyers’ ability to meet their green power needs across a global footprint.

Grid Viability & Natural Resources Availability

Market penetration and the ensuing availability of renewables varies depending on grid viability and natural resources. The intermittent nature of wind and solar power has led to concerns over the grid’s ability to handle high levels of renewable penetration. However, as major markets have hit milestones over the past year, appropriate market structuring has helped to mitigate penetration challenges.

A few examples include:

In February 2017, 52% of load in the SPP region of the U.S. was met with wind generation.

In October 2017, the Texas ISO, ERCOT, witnessed renewables meet 54% of the region’s demand.

On a regular basis, Denmark sees 100% of the country’s domestic load met with renewables.

Technology & Innovation

Concerns over the variability of these natural resources will continue to challenge market expansion and investment in 2018. However, increased pressure has led to innovations in technology and grid structures, helping to address both intermittency and curtailment. For example, an electricity connection between Germany and Poland will re-open this year with new phase shifting transformers. These transformers are a direct solution to the substantial wind capacity in northern Germany that regularly (but unpredictably) flows across the border into Poland. Greater grid stability in Poland is welcome news, as it is emerging as one of the most attractive European market for C&I direct purchasing.

We encourage clients to use a mix of generation and storage solutions (onsite renewables, offsite renewables, EACs, green tariffs, and other technologies on the horizon) to achieve their goals and balance regulatory and natural resource risks. Tools like the NEO Network™ are helpful to quickly assess these technology and market opportunities and deploy them across a global portfolio.